Yahoo Finance ATI Inc (ATI) (Q1 2024) Earnings Call Transcript Highlights: Surpassing Expectations with ...
Adjusted EPS: $0.48, surpassing top end of estimated range.
Revenue: Over $1 billion for the seventh consecutive quarter.
EBITDA Margin: 14% in Advanced Alloys & Solutions segment.
Free Cash Flow: Significant first quarter improvements over prior year.
Share Repurchase: Fully executed $150 million authorization.
2024 EPS Guidance: Increased, driven by strong demand and operational stability.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Bob, congrats on 22. I wanted to start here on the commercial aerospace side. I know the 737 MAX is incorporated in guidance, and it sounds like you have ample room to mitigate some of the near-term challenges across your whole portfolio, but wanted to ask on how long it would take for subdued MAX build rates to meaningfully impact ATI? A: Kimberly A. Fields - ATI Inc. - President, COO & Director: So just to give you a little bit of color, as we mentioned, there's been minimal impact on us. And primarily because it's more than offset by demand across all our other programs. So even if it was, as you said, further out and multiple quarters forward, as we're looking at it, a couple of things are true. One is wide-body demand is starting to ramp, which has much higher titanium content than the 737 MAX, which is more of an aluminum plane. The engines programs kind of across the board, we're seeing really strong demand on all of those programs, engine spares and MRO visits are up, which are some OEMs are predicting increases in that as well we're a key part of the GTF overhaul and parts replacement, and that's going to be elevated for several years as we work with them to help lower their AOGs. And lastly, you can't forget the LEAP-1A has just as much engine content in titanium as the 1B, and that is continuing to grow, and we anticipate that. So as we said in the near term, minimal impact, and we anticipate that for many quarters out that we're going to be in good shape.
Q: Got it. That's really helpful. And then -- on industrial demand, just wanted to get your take on what gives you confidence in a second half recovery? And what are the moving pieces that you're seeing on the industrial side? A: Donald P. Newman - ATI Inc. - Executive VP of Finance & CFO: This is Don. I'll take that question. Really, we've talked for a while now about our expectations that industrial is going to recover largely in the second half of the year. And what we're looking at is signals within the individual end markets that make up our industrial. And what I would say is, this last quarter, we saw some positives in oil and gas. Some of those are recurring, some are not. But we are seeing some indications from an order, a book order volume standpoint that there's positive trend. So what it does is it gives us great confidence that our expectation for Q2 is still strong. In addition to that, we've seen recoveries in Asia demand with our Asian Precision Rolled Strip business and stability in industrials overall.
Q: Kim, could you expand a little bit more on this widebody demand you were mentioning in your opening remarks. Is that coming from both Boeing and Airbus? And is it possible, could you discuss the 787 orders? Does it -- that you're getting right now? I mean is it supporting higher rates than what we're seeing right now given your lead times? A: Kimberly A. Fields - ATI Inc. - President, COO & Director: Thanks, Rich. Appreciate the question. Yes. There's been some -- obviously, the 350, they come out and stated higher rates as they're going forward. And I got to take everyone back to material lead times for these programs are 12 to 15 months out. So we are starting to see and talk with our customers, and we're very aligned with them. So we're starting to see that demand as they're talking to us around how do we ensure that the material flow is going to be available as they start to ramp up. As you said, the 787 has continued to ramp. And so we've started having those conversations on that side, and we anticipate seeing those orders being placed to get into the lead time for the second half of this year as we gear up for shipments into 2025.
Q: Okay. Don, just quickly, could you go over -- discuss a bit about how you're thinking about capital deployment now given that you used up the $150 million in the first quarter. At one point Don in time, I think you were talking about M&A also. So if you include a bit of a discussion about that in your answer. A: Donald P. Newman - ATI Inc. - Executive VP of Finance & CFO: Sure. Happy to do that. We talked many times about our balanced capital deployment strategy. We're focused on 3 elements growing the business delevering and returning capital to shareholders. That -- those 3 priorities and the balance around them is not expected to change. But you're pointing out that we did fully consume that the authorization that we had for share repurchases in Q1 with $150 million. So are we expecting to do additional share purchases this year would be a fair conclusion of the question that you're asking. The short answer to that is we have clearly prioritized returning capital to shareholders. Since early 2022, we repurchased almost $400 million of our shares. We are in a very fortunate position where we expect to have healthy cash generation, just have to look at the targets that we've shared. And so that, coupled with our strong balance sheet and liquidity, Rich, we're in a great position to continue to make choices. So what does that mean for maybe an additional share repurchase program this year? And the short answer on that is I don't want to get ahead of my board, but I would point out that our Board has been extraordinarily supportive of this balanced capital deployment strategy. And prioritizing return of capital to shareholders. I would not expect that the $150 million program we just completed will be the last program, quite the contrary. In terms of M&A, our bias has been -- yes, our bias on growing the business and investment has really been toward organic investment. And we've got a long list of great projects that provide robust returns, and we don't see that changing. It doesn't mean that we're not interested in M&A, but I can tell you the hurdles that we have internally -- hurdles in terms of very close adjacencies overlap to our current business, return profiles, those kinds of things. They're very robust. So if we were to do any sort of acquisition, it would certainly be -- it would be challenged to hit our internal targets. It isn't something that we are putting great emphasis on or priority. We have a great business to run that's growing with CapEx and is going to provide the returns and the targets that we've shared with the market. And so we're happy with where we're at. But it is -- I will tell you, it's nice to have choices. And it goes back to your original question, capital deployment. Our starting objective with our capital deployment strategy and focus on cash generation, Rich, was to put us in a position where we can make healthy choices for our shareholders and that's
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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